Rene Hartner: Beating the systems fundamentally

Real estate investing paved the way for Rene Hartner’s venture into currency trading. Hartner’s early career was spent working in the engineering world for semiconductor companies in Germany, using his mechanical engineering degree from the University of Applied Sciences in Munich. Hartner came to the United States from Germany in 1999 and got an MBA in finance from the University of Santa Clara. He started Artos Capital Management, which operates a currency hedge fund, in 2001.

Hartner financed his first investments in German real estate with Swiss francs and Japanese yen in the early 2000s. From there, he began actively trading currencies and started the fund. Besides trading its currency hedge fund, Artos also offers financial advice in currency trading and advises other funds and bond traders about currency risk. Although it is no longer marketed to new investors, Artos’ currency fund is still actively traded. While the fund concentrates on the major currency pairs, Hartner minimizes portfolio volatility and gains exposure to emerging markets by also trading the Australian dollar, New Zealand dollar, U.S. dollar index, South African rand and the Mexican peso.

Artos makes trading decisions based on fundamentals and avoids complex computerized technical models. “We’re focusing all the efforts on forecasting the micro economic environment of the countries we invest in. This includes forecasting interest rate structures, short-term and long-term interest rate differentials, expectations in inflation rates and GDP growth and balance of trades,” Hartner says. “We have a microeconomic model that offers a pretty high correlation to currency movements as well.” The fund does most of the trades as long-term investments (six months and beyond) and has an average holding period of two years for those trades.

One of Hartner’s most successful trades was on one of the first investments he did when the fund opened. “The microeconomic model showed the U.S. dollar was overvalued around 2001 against the euro and many other currencies. We invested in euros against U.S. dollars, [making] a major bet against the U.S. dollar in that [two year] time frame and almost doubled our money with that trade,” he says.

Hartner’s carry trade strategy has also been effective. “Today the fund is up over 50% because we entered into the carry trade strategy [when everybody] else exited between August of last year and January of this year. It was a contrarian investment,” he says. But Hartner’s research showed that many higher yielding currencies were clearly undervalued against Japanese yen, U.S. dollar, and British pound. “So we made a heavy investment into the so-called carry trade. The model we use is based on what the interest rate will be one to two years out,” Hartner says.

Outsmarting computer models is one of the best parts of trading for Hartner. “What excites me is beating those computer models and showing that you’re better off using a human brain and applying your overarching analysis compared to the best mathematicians that can program a computer. If you compare the Barclay’s Top 50 index, in the last eight years, the top index was up 40% and my fund is up 198%. That speaks for itself,” he says.